**Policy Summary: Expansion of Settlement Options under the Asian Clearing Union (ACU) Mechanism**
This circular, RBI/2019-20/177 A. P. (DIR Series) Circular No. 22, issued by the Reserve Bank of India (RBI) on March 17, 2020, informs all Authorised Dealer Category I banks (AD banks) of revisions to the Asian Clearing Union (ACU) settlement system. The ACU Board of Directors has decided to permit the use of Japanese Yen for settling payments among ACU member countries, in addition to the existing ACU Dollar and ACU Euro.
Key changes include:
* **Currency Denomination:** The Asian Monetary Unit is now denominated as "ACU Dollar," "ACU Euro," and "ACU Yen," each equivalent in value to one US Dollar, one Euro, and one Japanese Yen, respectively. This reflects amendments to clauses a and b of Article IV of the General Provisions of the Agreement establishing the ACU.
* **Implementation Date:** Effective March 6, 2020, ACU participants have the option to settle transactions in ACU Dollar, ACU Euro, or ACU Japanese Yen.
* **Account Management:** AD banks are permitted to open and maintain ACU Dollar, ACU Euro, and ACU Japanese Yen accounts with their correspondent banks in other participating countries. All eligible payments must be settled through these accounts.
* **Regulatory Context:** The circular references Regulations 3 and 5 of Notification No. FEMA 14(R)/2016-RB (Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016), dated May 02, 2016, with amendments notified in the Gazette of India on March 06, 2020.
* **Temporary Suspension:** The circular notes that ACU Euro operations remain temporarily suspended since July 1, 2016, as per circular RBI/2015-16/441 A.P. (DIR Series) Circular No. 81 dated June 30, 2016.
* **Dissemination:** AD banks are instructed to bring the contents of this circular to the attention of their constituents.
This directive is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and is without prejudice to other applicable laws and regulations.
For further information, contact Sharmila Thakur, Officer-in-Charge.
Key Entities Referenced
Asian Clearing Union: An international payment arrangement involving several countries in Asia, designed to facilitate trade among participating nations.
ACU Dollar: A unit of account used within the Asian Clearing Union, equivalent in value to one US Dollar.
ACU Euro: A unit of account used within the Asian Clearing Union, equivalent in value to one Euro.
ACU Yen: A unit of account used within the Asian Clearing Union, equivalent in value to one Japanese Yen.
Japanese Yen: The official currency of Japan, now permitted for settling payments within the Asian Clearing Union.
Authorised Dealer Category I Banks: A category of banks authorized by the Reserve Bank of India to deal in foreign exchange.
Foreign Exchange Management Act (FEMA), 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016: Regulations pertaining to the method of receiving and making payments under the Foreign Exchange Management Act.
RBI/2019-20/177
A. P. (DIR Series) Circular No. 22 March 17, 2020
To,
All Authorised Dealer Category - I Banks
Madam / Sir,
Settlement system under Asian Clearing Union (ACU) Mechanism
The Board of Directors of ACU have decided to permit Japanese Yen for settling payments among the
ACU member countries. Accordingly, clause (a) and (b) of Article IV of the General Provisions of
Agreement establishing the Asian Clearing Union have been revised and the Asian Monetary Unit is
now denominated as "ACU Dollar", “ACU Euro” and “ACU Yen” which shall be equivalent in value to
one US Dollar, one Euro and one Japanese Yen respectively.
2. Attention of Authorised Dealer Category - I banks (AD banks) is invited to Regulations 3 and 5 of
Notification No. FEMA 14(R)/2016-RB [Foreign Exchange Management (Manner of Receipt and
Payment) Regulations, 2016] dated May 02, 2016 and the necessary amendments reflecting the above,
which have been notified in the Gazette of India on March 06, 2020.
3. In order to facilitate transactions / settlements, effective March 06, 2020, participants in the Asian
Clearing Union will have the option to settle their transactions either in ACU Dollar or ACU Euro or in
ACU Japanese Yen.
4. Further, AD banks are allowed to open and maintain ACU Dollar, ACU Euro and ACU Japanese Yen
accounts with their correspondent banks in other participating countries. All eligible payments are
required to be settled by the concerned banks through these accounts.
5. The amended Memorandum of Procedure for Channelling Transactions through Asian Clearing
Union (ACU) [Memorandum ACM] is enclosed.
6. Notwithstanding the above, it may be noted that as per circular RBI/2015-16/441 A.P. (DIR Series)
Circular No. 81 dated June 30, 2016, operations in ‘ACU Euro’ has been temporarily suspended with
effect from July 01, 2016.
7. AD banks may bring the contents of this circular to the notice of their constituents concerned.
8. The directions contained in this circular has been issued under sections 10(4) and 11(1) of the
Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and is without prejudice to permissions
/ approvals, if any, required under any other law.
Yours faithfully,
(Sharmila Thakur)
Officer-in-Charge